Business: digital tax reporting delayed for some businesses

Corporation tax

It was confirmed that the rate of corporation tax will reduce to 19% from April 2017. As previously announced, the corporation tax rate will reduce by a further 2% to 17% by 2020.

Making tax digital

Unincorporated businesses and landlords that have an annual turnover below the VAT threshold will now have until April 2019 to prepare before making tax digital (MTD) becomes mandatory.

MTD will require businesses to use digital software to keep tax records and update HMRC on a quarterly basis.

Businesses, self-employed people and landlords will be required to start using the new digital service from:

April 2018 if they have profits chargeable to income tax and pay class 4 national insurance contributions (NICs) and their turnovers are in excess of the VAT threshold

April 2019 if they have profits chargeable to income tax and pay class 4 NICs and their turnovers are below the VAT threshold (as above)

April 2019 if they are registered for and pay VAT

from April 2020 if they pay corporation tax

Businesses, self-employed people and landlords with turnovers of less than £10,000 per annum are exempt from these requirements.

Cash basis entry threshold

From 6 April 2017, the cash basis entry threshold is to increase from £83,000 to £150,000.

Cash basis accounting is an optional and simplified method for calculating and reporting taxable profits for qualifying trading businesses.

Off-payroll working in public sector

The rules surrounding individuals working for public sector organisations through their own limited company will change from April 2017.

The ‘off-payroll’ rules will mean that where a public sector organisation engages an off-payroll worker, that organisation will be responsible for deducting and paying the associated tax and NICs to HMRC.

The 5% allowance that was available to reflect the costs of administering the rules will also be removed for those who work in the public sector.

Appropriations into stock

A new measure for corporation tax and income tax will prevent an election being made for appropriations of a capital asset into trading stock made on or after 8 March 2017.

The purpose is to prevent businesses converting losses attributable to a period for which the asset was a capital asset into more flexible trading losses. The legislation will only permit this election to be made where the appropriation at market value into trading stock would give rise to a chargeable gain and not where it gives rise to an allowable loss.

Hybrid and other mismatches

Two retrospective minor changes to the hybrid and mismatch regime came into effect on 1 January 2017. The first change removes the need to make a formal claim in relation to the permitted time period rules, which deal with mismatches involving financial instruments.

The second change provides that deductions for amortisation are not treated as relevant deductions in relation to the legislative requirements.

Research and development

The government will make administrative changes to the research and development (R&D) expenditure credit to increase certainty and simplicity around claims and will take action to improve awareness of R&D tax credits among SMEs.

Business rates

The adverse effect of the changes to the rates revaluation in England in April 2017 on some businesses may be reduced in certain circumstances. The measures include:

support for small businesses losing small business rate relief to limit increases in their bills to the greater of £600 or the real term transitional relief cap for small businesses each year

providing English local authorities with funding to support discretionary relief, to allow them to provide support to individual hardship cases in their local areas

a £1,000 business rate discount for pubs with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for one year from 1 April 2017.

Disposals of land in the UK

Legislation will be introduced in Finance Bill 2017 to ensure that all profits arising from the dealing or development of land recognised in the accounts on or after 8 March 2017 will be taxed, regardless of the contract date. Previously the rule only applied to contracts entered into on or after 5 July 2016.

Sugar drinks industry levy

The levy rate for added sugar drinks will be set at 18p per litre for drinks with a total sugar content of 5-7g, per 100ml, and 24p per litre for those with a total sugar content of 8g or more, per 100ml.